Final Results

Speedy Hire PLC 03 June 2004 3 June 2004 SPEEDY HIRE Plc PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2004 Speedy Hire is a leading provider of equipment hire services to UK contractors and builders, industry, utilities and the public sector, operating from over 280 depots throughout the country. The Group is engaged primarily in tool hire, with complementary businesses specialising in portable accommodation, surveying, lifting and power generation equipment. HIGHLIGHTS • Turnover up 18% to £170.2 million (2003: £143.9 million1) • Profit before tax and goodwill amortisation up 17% to £22.0 million (2003: £18.9 million) • Profit before tax up by 16.5% to £21.2 million (2003: £18.2 million) • Basic earnings per share with underlying tax charge2 up 23% to 38.66p (2003: 31.39p) • Basic earnings per share up 33% to 42.34p (2003: 31.89p) • Total dividend per share up 17% to 10.5p (2003: 9.0p) • Like for like tool hire turnover up 9% - market share increased • Return on capital employed (before goodwill amortisation) of 17.8% (2003: 16.9%) • Comfortable gearing of 65.3% (2003: 66.9%) 1 Restated following introduction of FRS 5 Application Note G 2 Before goodwill amortisation and with an underlying tax rate of 27.0% (2003: 30.9%) Outlook 'Our customers report full order books with private sector contracts compensating for the deferral of some public sector work and they have indicated that they expect this situation to continue for some time to come. Subject to no material change in the economic outlook, I am confident of reporting further good progress in the current year.' David Wallis - Chairman For further information: Speedy Hire Plc Hudson Sandler John Brown, Chief Executive Nick Lyon/James Benjamin Neil O'Brien, Group Finance Director Tel: 020 7796 4133 Tel: 020 7796 4133 on Thursday 3 June (thereafter tel: 01942 720000) Website: www.speedyhire.plc.uk SPEEDY HIRE Plc CHAIRMAN'S STATEMENT I am delighted to report another excellent year for Speedy Hire Plc. Of the many elements that make towards a successful and profitable business, none is more important than its people. These results demonstrate the skill and enthusiasm of Speedy Hire's people and their willingness to 'go the extra mile' for our customers. The successful outcome for the year is a credit to them all and I would like to extend the thanks of both the board and shareholders to each of them. Financial Performance Turnover increased by 18% to £170.2 million (2003: £143.9 million) and pre-tax profits by 17% to £22.0 million before goodwill amortisation (2003: £18.9 million). Earnings per share, before goodwill amortisation and assuming an underlying tax rate, increased by 23% to 38.66 pence (2003: 31.39 pence). Our balance sheet continued to strengthen. During the year we invested £58 million in new equipment in line with our strategy of maintaining the most modern fleet in the hire services industry. Investment in tools and equipment over the last three years has totalled £138 million, ensuring that we are well placed to continue expansion into the future. Our national network has continued to expand, with very strong growth being generated by our specialist divisions. Our policy on dividends is for them to be progressive and covered not less than three times by earnings. The board is proposing a final dividend of 6.8 pence per share, making a total of 10.5 pence per share for the year as a whole, an increase of 17%. Even after the strong increase this year, we remain well within these limits. The Board We are constantly seeking to strengthen both the PLC board and the Operating board ensuring well planned management succession. We are considering the position of Chief Executive as we prepare for John Brown's retirement next year. We have a very strong Chief Operating Officer and Finance Director in Steve Corcoran and Neil O'Brien who have been with the business for 13 years and five years respectively. Their skills have been supplemented by Andrew Simpson who joined us in August 2003 as Business Development Director from N M Rothschild. I am confident we have a first class team to lead the future growth of the business. At Operating board level, Colin Brindle and Robin Hall, two long serving Managing Directors, have reached retirement age and I would like to thank them for their contribution to the business and wish them well for the future. However, our ongoing succession planning has ensured that the businesses remain in safe hands. Three years ago, shareholders approved the introduction of a Long Term Incentive Plan (LTIP) for the key people in the company. I am delighted to report that this will pay out 93% of the maximum amount approved, mirroring the increase in earnings per share over the last three years. Shareholders have seen a 100% increase in value as measured by total shareholder return over the LTIP period. At the AGM in July this year, the board will be seeking approval to introduce a new LTIP. Outlook Current economic statistics indicate that both the UK and global economies are continuing to strengthen although there are certain obvious factors such as fuel prices and interest rates outside the control of management which impact on the business. The diversity of the range of activities of our customers in the construction sector, both by size and by geography, adds a further level of stability to our business activities as we have no unduly large exposure to any one sector. Our customers report full order books with private sector contracts compensating for the deferral of some public sector work and they have indicated that they expect this situation to continue for some time to come. Subject to no material change in the economic outlook, I am confident of reporting further good progress in the current year. SPEEDY HIRE Plc CHIEF EXECUTIVE'S REVIEW Simple, straightforward and consistent: these are the key words that define Speedy Hire, our strategy and our track record of delivery. By simply providing the best kit and employing the best people in our industry, we have grown to become the clear market leader in UK tool hire. The consistency of our success is underlined by the fact that this is the twelfth consecutive year of record results from our hire operations. Results The key financial statistics speak for themselves: • Turnover is up from £143.9 million to £170.2 million, a rise of 18%. • Operating profit before goodwill amortisation has grown from £21.8 million to £25.5 million, an increase of 17%. • Group profit before goodwill amortisation and taxation is up from £18.9 million to £22.0 million, a rise of 17%. • Earnings per share before goodwill amortisation and with underlying tax charge, increased to 38.66 pence, an uplift of 23%. • Return on capital employed (before goodwill amortisation) has increased from 16.9 % to 17.8%. Just as important is the fact that this was by no means an exceptional year for Speedy Hire. All parts of the business contributed to our success, with every division making good like-for-like sales progress. In total we added a net 29 depots to our tool hire and specialist operations during the year, in line with our targets, bringing our national total to 286. Tool Hire We have consolidated our position as the undisputed leader in the growing UK tool hire market. Our like-for-like sales growth of 9% during the year considerably outstripped market growth of around 3%, driving a further increase in our market share. With national coverage, we are strongly placed to meet the demands of major UK contractors. We concluded new preferred supplier agreements with Mowlem and Costain during the year, and more recently with Interserve. We added 23 depots, 15 through acquisitions and eight through greenfield developments. We also closed four underperforming units, making a net addition of 19 during the year. The acquisition in June of Kingfisher Hire in South Wales added seven depots to Speedy Western, while the purchase in August of St Vincent Plant, the hire business of the Clugston Group, brought us six depots in Yorkshire and Lincolnshire to strengthen Speedy Northern. Finally in January we acquired the Pitreavie business, adding two depots to Speedy Scotland. Our regional businesses have performed well. Speedy Scotland, which was formed in 2003, has achieved all our targets. This new regional business was set up to provide the right management resources and structure to accommodate growth. We have continued to place emphasis on developing the right infrastructure and control environment to achieve this. Speedy Lifting was created in November 2002 and has enjoyed a successful first year of growth. It has also expanded its network through four greenfield openings and now operates in 28 locations. This business focuses on the hire of lightweight lifting equipment and, like our more established specialist companies, has attractive prospects for growth. Specialist Companies We have a proven ability to create specialist niche businesses that complement our core tool hire operations, and to grow them profitably both by organic development and the successful integration of acquisitions. Speedy Space, which specialises in the hire of accommodation and storage units, again produced record results last year. We expanded its network to 14 depots and added 900 units to its asset base. It now has more than 13,000 units available for hire and continues to achieve utilisation rates of just under 90%. Speedy Power, our power generation business, continued to grow sales and profits rapidly. We added two new greenfield depots and acquired a third through the acquisition in July of Ashtead Plant's Big Air division, specialising in the complementary business of portable, high capacity, high pressure compressed air systems. This gave the business a total of seven depots at the year end. Speedy Survey also continued to grow strongly. This business focuses on the hire of specialist surveying equipment and now operates in 13 locations, with its network strengthened during the year by one greenfield opening and the acquisition in September 2003 of the two depots of Leica Geosystems, dedicated to the hire of construction surveying equipment. People We produce growing returns for our shareholders because we have been consistently willing to invest in the best hire fleet in the UK and in people who will sell it to our customers with passion and commitment. Our culture and reward structure provide great incentives to succeed, with performance-related bonuses accounting for a high proportion of total remuneration. During the year our 2,375 staff shared bonuses totalling a record £7.6 million. I would like to congratulate them on their success and thank them all for their individual contributions to our financial performance and to building our reputation as the industry leader. This year we introduced our long service award which has been established to recognise the loyalty of those employees who have committed their careers to Speedy. It is thanks to the entire Speedy team that we were recognised once again by the Hire Association of Europe in April 2004, when we were named as 'Hire Company of the Year' for the second consecutive year, and also won their award for the best industry website. The Future We serve a market that has positive and consistent growth characteristics. We have considerable opportunities including: - • Expansion of the existing depot network • Expansion of the portfolio of specialist businesses • Capturing more revenue from existing customers • Improved penetration of non-construction markets • Further acquisitions Our major clients in the construction industry remain busy, with record forward order books. I therefore believe that we are well placed to continue our successful organic growth, and we have demonstrated over many years that we are well equipped to enhance this by the successful identification, negotiation and integration of acquisitions. I am sure that there will be more opportunities to acquire good quality businesses and assets at reasonable prices over the year ahead. We are already the UK's number one in tool hire and the hire of surveying equipment, and it is our aim to become the number one or two player in every market we service. I have no doubt that we have the right people and the right strategy in place to achieve this goal. John Brown Chief Executive Group Profit and Loss Account For the year ended 31 March 2004 2004 2004 2004 2003 Existing Restated Note Operations Acquisitions Total Total £'000 £'000 £'000 £'000 Turnover - Continuing operations 1 164,872 5,359 170,231 143,853 Cost of sales 1 (46,156) (2,026) (48,182) (38,583) Gross profit 118,716 3,333 122,049 105,270 Distribution costs (17,969) (525) (18,494) (15,612) Administrative expenses (77,540) (1,948) (79,488) (68,751) Other operating income 615 - 615 179 Operating profit before goodwill amortisation 24,506 994 25,500 21,770 Goodwill amortisation (684) (134) (818) (684) Operating profit - Continuing operations 1 23,822 860 24,682 21,086 Net interest payable and other similar charges (3,471) (2,879) Profit on ordinary activities before taxation 1 21,211 18,207 Taxation 6 (3,601) (4,946) Profit for the year attributable to the group 17,610 13,261 Dividends on equity shares 7 (4,371) (3,743) Retained profit for the financial year 13,239 9,518 Pence Pence Earnings per share - Basic 2 42.34 31.89 - Diluted 2 41.50 31.44 - Basic pre-goodwill amortisation 2 44.21 33.53 - Basic pre-goodwill amortisation with underlying 2 38.66 31.39 tax charge Dividends per share 7 10.50 9.00 Group Balance Sheet As at 31 March 2004 2004 2003 £'000 £'000 £'000 £'000 Fixed assets Intangible assets 4,988 4,040 Tangible assets 156,685 129,466 161,673 133,506 Current assets Stocks and work in progress 3,637 3,217 Debtors: amounts falling due within one year 47,291 44,091 Cash at bank and in hand 6,921 7 57,849 47,315 Creditors: amounts falling due within one year (45,422) (63,577) Net current assets/(liabilities) 12,427 (16,262) Total assets less current liabilities 174,100 117,244 Creditors: amounts falling due after more than one year (67,295) (25,402) Provisions for liabilities and charges (13,313) (12,447) Net assets 93,492 79,395 Capital and reserves Called up share capital 2,132 2,130 Share premium account 32,692 32,537 Revaluation reserve 50 51 Merger reserve 3,660 3,660 Investment property revaluation reserve 122 177 Capital redemption reserve 26 26 Profit and loss account 54,810 40,814 Equity Shareholders' funds 93,492 79,395 Group Cash Flow Statement For the year ended 31 March 2004 2004 2003 Note £'000 £'000 Cash inflow from operating activities 3 49,873 39,066 Returns on investments and servicing of finance Interest received 163 76 Interest paid (2,834) (771) Interest element of hire-purchase and finance lease rental payments (713) (2,184) Net cash outflow from returns on investments and servicing of finance (3,384) (2,879) Taxation (824) (5,618) Capital expenditure Purchase of tangible fixed assets (51,999) (12,597) Sale of tangible fixed assets 15,408 15,898 Net cash (outflow)/inflow for capital expenditure (36,591) 3,301 Acquisitions and disposals Purchase of businesses (8,964) - Net cash outflow from acquisitions and disposals (8,964) - Equity dividends paid (3,910) (3,451) Cash (outflow)/inflow before financing (3,800) 30,419 Financing Issue of share capital 157 51 New bank loans 67,000 - Capital element of hire-purchase and finance lease rental payments (52,396) (22,700) Net cash inflow/(outflow) from financing 14,761 (22,649) Increase in cash in the year 4 10,961 7,770 Reconciliation of net cash flow to movement in net debt For the year ended 31 March 2004 Increase in cash in the period 4 10,961 7,770 Cash (inflow)/outflow from increase/decrease in debt and hire-purchase and (14,604) 22,700 lease financing Change in net debt resulting from cash flows (3,643) 30,470 New hire-purchase and finance lease contracts (4,327) (27,024) Movement in net debt in the year (7,970) 3,446 Net debt at 30 March 2003 (53,082) (56,528) Net debt at 31 March 2004 4 (61,052) (53,082) Notes to the Financial Statements For the year ended 31 March 2004 Preparation of preliminary results The preliminary results have been prepared on the basis of the accounting policies set out in Speedy Hire Plc's annual report and accounts for the year ended 31 March 2004. The preliminary results were approved by the board of directors on 3 June 2004. The financial information contained in this announcement does not comprise full accounts within the meaning of Section 240 of the Companies Act 1985. The financial information contained in this announcement in respect of the year ended 31 March 2004 has been extracted from the financial statements which have been audited and reported upon without qualification by KPMG Audit Plc and did not contain a statement under Section 237 (2) or (3) of the Companies Act 1985. 1. Turnover and profit on ordinary activities before taxation Turnover (wholly derived from activities within the UK) and profit on ordinary activities before taxation are analysed by class of business as follows: - 2004 2003 Restated £'000 % £'000 % Turnover Hire services 170,046 99.9 143,669 99.9 Central including property income 185 0.1 184 0.1 170,231 100.0 143,853 100.0 Following the introduction of FRS 5 Application Note G, turnover and cost of sales categories have been re-classified and the comparative information has been restated accordingly. The net effect of the reclassification is to decrease turnover and cost of sales by £3,694,000 (2003: £3,334,000). There is no overall effect on operating profit. 2004 2003 £'000 £'000 Operating profit on ordinary activities Hire services 27,729 23,753 Central overheads net of property income (3,047) (2,667) Operating profit 24,682 21,086 Net interest payable and other similar charges (3,471) (2,879) Profit on ordinary activities before taxation 21,211 18,207 Central overheads net of property income includes £614,000 (2003: £179,000) of profit on disposal of properties. 2. Earnings per share Basic earnings per share is based on the profit after taxation of £17,610,000 (2003: £13,261,000) and the weighted average number of 5p ordinary shares in issue during the year of 41,594,923 (2003: 41,587,476). The weighted average number of ordinary shares used for the diluted earnings per share is calculated as follows: 2004 2003 Number Number Weighted average number of ordinary shares in issue during the year 41,594,923 41,587,476 Diluting effect of options under Allen Plc Savings Related Share Option 260 - Scheme Diluting effect of LTIP shares 839,700 591,232 Diluted weighted average number of ordinary shares 42,434,883 42,178,708 The table below reconciles basic earnings per share to both earnings per share pre-goodwill amortisation, and earnings per share pre-goodwill amortisation with underlying tax charge. 2004 2003 Pence Pence Basic earnings per share 42.34 31.89 Goodwill amortisation charge after tax per share 1.87 1.64 Earnings per share pre-goodwill amortisation 44.21 33.53 Adjustment to tax charge per share to reflect underlying current year tax (5.55) (2.14) rate of 27.0% (2003: 30.9%) Earnings per share pre-goodwill amortisation with underlying tax charge 38.66 31.39 3. Reconciliation of operating profit to cash flow from operating activities 2004 2003 £'000 £'000 Operating profit 24,682 21,086 Depreciation charge 24,540 21,109 Amortisation charge 818 684 Profit on sale of tangible fixed assets (4,200) (4,263) (Increase)/decrease in stocks (173) 147 (Increase)/decrease in debtors (1,536) 235 Increase/(decrease) in creditors 5,041 (547) Charge in respect of share related awards 701 615 Net cash inflow from operating activities 49,873 39,066 4. Analysis of net debt At 31 March Cash Other non- At 31 March 2003 Flow cash changes 2004 £'000 £'000 £'000 £'000 Cash at bank and in hand 7 6,914 - 6,921 Overdrafts (4,047) 4,047 - - (4,040) 10,961 - 6,921 Debt due after one year - (67,000) - (67,000) Hire-purchase and finance lease contracts (49,042) 52,396 (4,327) (973) (53,082) (3,643) (4,327) (61,052) 5. Year end gearing (calculated as net debt as a percentage of shareholders' funds) stands at 65.3% (30 March 2003: 66.9%). 6. The charge for taxation for the year represents an effective tax rate of 17.0% (2003: 27.2%). The underlying effective tax rate excluding adjustments in respect of prior years is 27.0% (2003: 30.9%). 7. The Board has proposed a final dividend of 6.8 pence per share to be paid on 27 August 2004 to shareholders on the register at 30 July 2004. This, together with an interim dividend of 3.7 pence per share paid on 30 January 2004, makes a total dividend for the year of 10.5 pence per share. 8. The Annual Report and Accounts for the year ended 31 March 2004 will be posted to shareholders on or about 21 June 2004. This information is provided by RNS The company news service from the London Stock Exchange

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